Tax Requirements for Marginal Income Earners


The Bureau of Internal Revenue issued Revenue Memorandum Circular (RMC) No. 7-2014 to clarify issues on registration and compliance requirements of marginal income earners (MIE).

Who are Marginal Income Earners?

This RMC clarifies, among others, the following:

  1. MIE are individuals whose business do not realize gross sales or receipts exceeding P100,000 in any 12-month period
  2. MIE are not deriving compensation as employee
  3. Ativities of such MIE should be principally for subsistence or livelihood
  4. MIE shall not include licensed professionals, consultants, artists, sales agents, brokers and others similarly situated, including all others whose income have been subjected to withholding tax

Registration and Compliance Requirements of MIE

The incidence of being a MIE as required under RR 7-2012 covers the following privileges and minimum registration and tax compliance requirements:

  • Registration with the Bureau using BIR Form 1901 with the following minimal documentary requirements :
    • Sworn Statement of Income for the year (Annex “A”), and
    • NSO Certified or Local Civil Registry Birth Certificate;
  • Exemption from the payment of Annual Registration Fee (ARF);
  • Registration of Books of Accounts (e.g. two-column journal or other simplified books for daily expenses and revenues);
  • Issuance of registered principal receipts/sales invoices as prescribed under RMO 12-2013;
  • Filing and Payment of Annual Income Tax Return using BIR Form 1701 similar to any other self-employed individuals; and
  • Exemption from payment of business taxes (i.e. VAT or any Percentage Tax).

Challenges to MIEs

Even if MIE enjoys certain exemptions, it is clear that they are subject to income tax unlike minimum wage earners.


The registration and maintenance of books of accounts and issuance of registered receipts and invoices also constitute additional burden to the MIE considering the level of income they are earning. It would also be inconvenient on the part of these MIEs to maintain such book of accounts.  Note that RMC No. 7-2014 includes the following as MIEs:

  • agricultural growers/producers (farmers/fishermen) selling directly to ultimate consumers
  • small sari-sari stores
  • small carinderias or “turo-turos”
  • drivers/operators of a single unit tricycle

What BIR may have failed to consider is that these people are earning far less that those who are earning minimum wage as employees who earn around P170,000+ if considered paid on weekend and P140,000 if not considered paid on weekend compared to the MIEs whose gross receipts/sales do not exceed P100,000.  Furthermore, such P100,000 is still gross of the cost of sales/services.

Considering such situation, a MIE may be improperly burdened by tax obligations complying with this RMC.

Full Text

To see the full text of RMC No. 7-2014, please refer to the copy below:

Disclaimer: Opinions expressed in this article are that of the author and information provided are for general conceptual guidance for public information and are not substitute for expert advice. Contact for more information and if you want to avail professional services. Find us on Facebook!

Orlando Calundan is a CPA who has exposures in FS audit of entities in various industries such as real estate, food/restaurants, manufacturing, service organizations and BPOs, automotive, holding/investment companies and more. He also has exposure on internal audit engagements.

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